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Business-to-Business Markets: How and Why Organizations Buy. Chapter Objectives. Describe the general characteristics of business-to-business markets Explain the unique characteristics of business demand Describe how business or organizational markets are classified

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Presentation Transcript
chapter objectives
Chapter Objectives
  • Describe the general characteristics of business-to-business markets
  • Explain the unique characteristics of business demand
  • Describe how business or organizational markets are classified
  • Explain the business buying situation and describe business buyers
  • Explain the roles in the business buying center
  • Understand the stages in the business buying decision process
  • Understand the growing role of B2B e-commerce
real people real choices
Real People, Real Choices
  • PPG Industries (Vicki Holt)
  • How to react to competitor Cardinal’s strategy?
    • Option 1: continue with current strategy
    • Option 2: acquire an independent IGU manufacturer
    • Option 3: continue with Intercept brand IGU, invest in IGU manufacturing
business markets buying and selling when stakes are high
Business Markets: Buying and Selling When Stakes Are High
  • Business-to-business marketing: the marketing of goods and services that businesses and other organizations buy for purposes other than personal consumption
  • Business-to-business (organizational) markets include manufacturers, wholesalers, retailers, and other organizations
characteristics that make a difference in business markets
Characteristics That Make a Difference in Business Markets
  • Multiple buyers
  • Number of customers
  • Size of purchases
  • Geographic concentration
business to business demand
Business-to-Business Demand
  • Derived demand: Caused by demand for consumer goods or services.
  • Inelastic demand: Occurs when changes in price have little or no effect on the amount demanded.
business to business demand cont d
Business-to-Business Demand (cont’d)
  • Fluctuating demand: Small changes in consumer demand create large increases or decreases in business demand; life expectancy of product can cause fluctuating demand
  • Joint demand: demand for two or more goods used together to create a product
types of business to business markets
Types of Business-to-Business Markets
  • Producers: for production of other goods and services
  • Resellers: for reselling, renting or leasing
  • Organizations
    • Government markets
    • Not-for-profit institutions
north american industry classification system
North American Industry Classification System
  • NAICS: a numerical coding of industries in the United States, Canada, and Mexico
the buying situation
The Buying Situation
  • Buy class framework: identifies degree of effort firm needs to collect information and make a purchase decision
    • Straight rebuy: Routine purchases that require minimal decision-making
    • Modified rebuy: Previous purchases that require some change and limited decision-making.
    • New-task buy: New and complex or risky purchases that require extensive decision-making.
the professional buyer
The Professional Buyer
  • Trained professional buyers typically carry out buying in business-to-business markets:
    • Purchasing agents
    • Procurement officers
    • Directors of materials management
the buying center
The Buying Center
  • The group of people in an organization who participate in a purchasing decision
    • Initiator
    • User
    • Gatekeeper
    • Influencer
    • Decider
    • Buyer
step 1 problem recognition
Step 1: Problem recognition
  • Someone sees that a purchase can solve a problem
step 2 information search
Step 2: Information Search
  • Buying center searches for information about products and suppliers
  • Develops product specifications -- a written description of the quality, size, weight, color -- for the purchase
  • Identifies potential suppliers and obtains proposals
step 3 evaluation of alternatives
Step 3: Evaluation of alternatives
  • Buying center assesses proposals
  • Evaluations include discount policies, returned-goods policies, cost of repair, terms of maintenance, cost of financing, etc.
step 4 product and supplier selection
Step 4: Product and supplier selection
  • Single sourcing: relying on a single supplier.
  • Multiple sourcing: buying from several different suppliers.
  • Reciprocity: “I’ll buy from you, and you’ll buy from me.”
step 4 product and supplier selection cont d
Step 4: Product and Supplier Selection (cont’d)
  • Outsourcing: firms obtain outside vendors to provide goods/services that might otherwise be supplied in-house
  • Crowdsourcing: firms use expertise from around the globe to solve a problem
  • Reverse marketing: buyers try to find capable suppliers and “sell” their purchase to the suppliers
step 5 postpurchase evaluation
Step 5: Postpurchase Evaluation
  • Assess whether the performance of the product and the supplier is living up to expectations
business to business e commerce
Business-to-Business E-Commerce
  • Internet exchanges between two or more businesses
  • Include exchanges of information, products, services, and payments
intranets extranets and private exchanges
Intranets, Extranets,and Private Exchanges
  • Intranets link employees in a private corporate computer network.
  • Extranets allow authorized suppliers, customers, and other outsiders to access the firm’s intranet.
  • Private exchanges link an invited group of suppliers and partners over the Web.
security threats
Security Threats
  • Security threats come from hackers and well-meaning employees who give out passwords
  • Firewall: Hardware and software that ensures only authorized individuals gain entry to a computer system
  • Encryption: Software that scrambles a message so only another individual (or computer) with the right key can unscramble it
real people real choices22
Real People, Real Choices
  • PPG Industries (Vicki Holt)
  • Vicki chose Option 3: continue with Intercept brand IGU, but invest directly in IGU manufacturing to provide an alternative to Cardinal
  • The move has been well received by all except the large independent IGU manufacturer
marketing in action case you make the call
Marketing in Action Case:You Make the Call
  • What is the decision facing Airbus?
  • What factors are important in understanding this decision situation?
  • What are the alternatives?
  • What decision(s) do you recommend?
  • What are some ways to implement your recommendation?
keeping it real fast forward to next class decision time at reebok
Keeping It Real: Fast Forward to Next Class Decision Time at Reebok
  • Meet Que Gaskins, VP of global marketing for the RBK division of Reebok
  • Allen Iverson’s endorsement changed Reebok’s image, but it was still number 2.
  • The decision: How could Reebok capture the pulse of youth culture in the long run?